The Hindu Business Line : STP goes into action today

INSTITUTIONAL transactions in securities are expected to be quicker and cost-effective from Thursday as the straight through processing (STP) system goes into action.

STP has become mandatory for all institutional transactions in the equity market from July 1, 2004.

Mr G.N. Bajpai, Chairman, Securities and Exchange Board of India, on Wednesday inaugurated the STP interoperability hub at the National Stock Exchange.

The objective of making STP mandatory for the Indian securities market is to ensure that the market is efficacious, said Mr Bajpai. "When the flow of capital is borderless, the defining criteria for issuers and investors would be the efficacy of the market. This includes both efficiency and cost of transacting in the market," he said.

This is also a step towards moving to T+1 settlement systems. "Once RTGS is also fully ready, we would be able to move to T+1," he said. STP is a process-driven mechanism to control all elements of the workflow in a financial transaction that allows electronic capturing and processing of transactions in one pass from the point of origin to settlement.

STP was launched in India in November 2002 and is currently being used by market participants on a voluntary basis. Several STP providers have been providing service to market participants but there was no interoperability between them.

The NSE has now set up the ST Central Hub to provide interoperability and ST providers connect to this hub for the purpose of sending and receiving messages between them.

"Ours is the first market to make STP mandatory and interoperability an actual reality. We are also, perhaps, the first country to have a legal and regulatory framework within which STP will operate," said Mr Ravi Narayan, Managing Director and Chief Executive Officer, NSE.

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